Pilot Trusts by Abacus

Pilot Trusts by Abacus

A pilot trust is set up during an individual’s lifetime and is a type of discretionary trust. Opened with as little as one pound, assets can be added to the trust at a later stage during the individual’s lifetime, or even on death through a legacy in their Will. It is also possible for an individual to open more than one pilot trust fund during their lifetime. These are suitable for estates up to £2million.

Though tax will still need to be paid on the deceased’s estate, the more pilot trusts made during their lifetime, the less tax that would potentially need to be paid. Currently, the ‘nil rate band’ (NRB) for an estate is £325,000 (this is the first £325,000 of an estate which does not get taxed), if pilot trusts are made however; they will each benefit form their own NRBs. This is particularly ideal for larger estates.

However, a pilot trust will have its own inheritance tax system: every ten years there will be a charge of up to 6% as well as an ‘exit charge’ for removal of assets from the pilot trust, unless the value of the trust remains below the NRB of £325,000, in which case there will be no charge.

A pilot trust must also be constituted, or established legally, to become a valid and legally binding document. In order to do so, the estate being settled must be in the hands of the trustee(s).

Pilot Trusts and Your Will

Once a pilot trust has been created and constituted, an appropriate Will, must then be created (or an existing one updated) to provide for a series of ‘gifts’ to each of the pilot trusts. These gifts will be the division of the estate to the relevant pilot trust.

As a form of trust, your assets will still be accessible for your use during your lifetime, as you can provide for assets to be gifted to the trust by the terms of your Will once deceased.

Information about Pilot Trusts

A pilot trust can also be ideal for unmarried couples as each person can leave their individual nil rate band to the trust. Once left to the trust, any left over then goes to the remaining cohabitee, saving a significant amount on inheritance tax.

Anything else left to a pilot trust, such as pension funds or life insurance payouts, will not form part of an individual’s estate, as they are available without needing to go through the process of probate.

Pilot Trusts are also subject to the Relevant Property Regime, please contact us for more information.

We will also ensure that any document we create for you is low cost, competitive and we’ll endeavor to beat any quote from elsewhere, all whilst always maintaining our professional standards.